Prospect Theory and Rogue Regimes
Christophe Guibert de Bruet
Political Science 472
In this paper, I will analyze chapters one through seven of Rogue
Regimes1 by Professor Raymond Tanter in light of prospect theory as
formulated in Avoiding Losses/Taking Risks: Prospect Theory and
International Conflict2, edited by Barbara Farnham. I will begin with a
brief overview of prospect theory, then proceed to a prospect theory
analysis of each of the Rogues mentioned in the book. Of the four themes
discussed in the book, threat perception, opportunities, politics, and
policies, I will be focusing on threat perception and opportunities, as
these hold the most relevance to prospect theory.
The essence of prospect theory is simple: people have such an
aversion to loss that they will put more effort into avoiding a loss than
they would in gaining something of equal value. This is related to the
Endowment effect, where one puts more value on what he/she must part with,
than it normally would be valued at. Also at issue is Anchoring, which is
what one views as the status quo in the loss/gain equation. Anchoring
changes much more quickly after a gain than it does after a loss. One
accepts t he gain of $1,000 as the status quo much more quickly than one
accepts their loss. This holds especially true for politicians, as they
are unwilling to incur losses on "their watch" due the damage it causes
to their political situation as well as the har sh judgment of history.
The relevance of prospect theory to political science and international
politics is that it offers an explanation for actions taken by
decision-makers that are incompatible with the Rational Choice model. The
Rational Choice mode l states that in order to make a rational decision
one must examine the Expected Utility of an action, which is determined by
weighing the Expected Benefits of an action versus its Expected Costs.3
The degree to which a leader follows this model determi ne how "Rational"
he is. Unfortunately, the Rational Choice model does not take into
account the psychological status of the decision-maker, which is where
Prospect Theory comes into play. Prospect Theory proposes two main
psychological conditions that affect decision-makers: Basements of Fear
and Windows of Opportunity. The Basement of Fear condition is where
Prospect Theory comes into effect. The Basement of Fear status is a
situation in which a decision-maker, due to the Endowment effect, is
willing to take great risks to recoup or prevent a potential loss. The
Window of Opportunity status, on the other hand, is one in which the
leaders have the potential for gain, and is ruled by the Rational Choice
model, as leaders measure the Expected Utility of their actions.
Assessing whether an opposing decision-maker is acting from a Basement of
Fear or a Window of opportunity is crucial, especially in view of one's
response to their actions. A tough stance and sanctions might have the
effect of "slamming shut" the Window of Opportunity, thus deterring the
decision-maker, while it would have a negative impact on a decision-maker
in a Basement of Fear, who could react unpredictably to the detriment of
all parties involved.4 Determining the psychological status of a
decision-maker is difficult, as one may be in a Basement of Fear and a
Window of Opportunity condition at the same time.
Chapter 2: Iran
In my prospect theory analysis of Iran5 I will first examine the
United StatesÕ threat perception of Iran and fear of loss in view of
Prospect Theory. I will then examine Iran's threat perception of the US
and its fear of loss in view of Prospect Theory . Is the United States
acting from a Basement of Fear, or a Window of Opportunity in regards to
Iran?
In order to answer this we must examine the United States' threat
perception of Iran. United States threat perception of Iran started in
1979, with the departure of the Shah and the rise to power of Khomeni and
his Islamic Fundamentalist government. The incident that sparked US
threat perception was the storming of the United States embassy by Iranian
"students" and the hostage crisis that followed. United States threat
perception increased with IranÕs sponsorship of international terrorism
directed a gainst its intrinsic interests in the Middle East. As a result
of this high threat perception, the United States decision-makers came to
view Iran as an "evil" regime, and thus constitutes a motivated bias to
view its actions as negative. Does high threat perception always lead to
a Basement of Fear? It does only when the threat perception includes a
fear of losing a strategic or intrinsic asset. We must then ask, is the
United States acting from a Basement of Fear in regards to Iran? One acts
from a Basement of Fear, when one is in a position to lose something important.
In the case of the United States and Iran, what does the US have to lose?
As the most populous state in the Gulf, Iran is at an advantage compared
to Saudi Arabia.6 As the United States' main energy supplier, Saudi Arabia
is a precious ally in the region. As Iran tries to export its Islamic
revolution, the United States is faced with the potential loss of an
important ally and access to an affordable energy supplier. Also, the
challenge by Iran to the American hegemon weakens commitments abroad, and
represents another potential loss. Iran itself, as an old ally of the
United States, could represent a loss that the US is trying to recoup,
though I doubt the validity of this statement. Anchoring concerning Iran
moved fairly quickly, and decision-makers were more concerned about losing
Iran to the Soviets, than they were about losing Iran. With its pursuit
of terrorism and weapons of mass destruction, Iran creates another poten
tial loss to US interests. To answer our previous question, is the United
States in a Basement of Fear in regards to Iran, the answer is yes. It is
unlikely that Iran could deter the United States, because to the United
States's fear of potential loss due to inaction.
Is Iran in a Basement of Fear concerning the US? Once against we
are faced with threat perception and potential losses. Iran has a high
threat perception with regards to the United States. This is due to the
United StatesÕ opposition the its Weapons o f Mass Destruction research,
as well as its generally hostile stance towards the Islamic revolution.
However, the US does not cause the fear of potential losses. It mainly
shuts windows of opportunity that Iran faces. With the lack of real and
potentia l losses, we cannot conclude that Iran is in a Basement of Fear.
Thus it should be feasible to deter Iran from certain actions, if the
deterrent threat is credible and the consequences harsh enough. Therefore
rehabilitative and retributive sanctions lik e the Iran and Libya
Sanctions Act are productive and should be maintained.
Chapter 3: Iraq
In my Prospect theory analysis of Iraq7, I will apply the same
method I used for Iran. I will determine whether the United States is
acting from a window of opportunity or Basement of Fear in regards to
Iraq, by examining its threat perception and fear of loss, and will then
do the same for Iraq regarding the US. Are US decision-makers in a
Basement of Fear regarding Iraq?
Though US threat perception of Saddam Hussein is high, this is
mainly due to a motivated bias of viewing him as "evil" following his
actions during and preceding the Gulf War. As a result the United States
has a high threat perception of Iraq, and is not likely to respond to
conciliatory actions by Saddam Hussein. This threat perception is
reinforced by the roguish qualities of Saddam Hussein's leadership, and
the constant challenge to United States commitments in the region. In
regards to real and potential losses, one could point to Kuwait. However,
the US has amply demonstrated its ability to keep the Iraqi military at
bay and is not likely to allow another invasion. There's always a
potential chemical weapons attack on Israel or Saudi Arabia, but the
retaliation of such an attack is sure to deter even the likes of Saddam
Hussein. Thus potential losses for the United States are comparatively
low. It is unlikely that US decision-makers are acting from a Basement of
Fear regarding Iraq.
As a unitary leader, Saddam Hussein's personality and fears have a
much greater impact on Iraqi policy than those of the United States or
Iranian decision-makers. Therefore his fears and concerns should be taken
into account in determining Iraq's threat perception, perceived losses and
potential losses. Saddam Hussein obviously has a high threat perception
of the US, due in great part to the Gulf War, and the US' attempts at
killing him/ousting him from power. In terms of potential losses, Saddam
fears losing control of Iraq, and views the United States actions as
aiming towards this. Also Saddam Hussein views Kuwait as a loss and is
willing to take great risks to regain it. Whether his views regarding
Kuwait have changed in the aftermath of the Gulf War remains uncertain.
Thus there is no doubt that Saddam Hussein is acting from a Basement of
Fear. However, Saddam Hussein is also acting from a window of
opportunity. By standing up to the US, Saddam is increasing his prestige
in the Arab world, to the detriment of the United States, which appears to
bully Iraq. Saddam Hussein is not likely to respond to sanctions, because
he is acting from a Basement of Fear. Therefore the Clinton
Administration's policy of Dual Containment will fail and will have the
consequence of pushing Iran and Iraq closer together. While
rehabilitative sanctions should be maintained, the United States should
abstain from retributive sanctions and should be more responsive to
Saddam's conciliatory advances than it has been in the past, in order to
allay some of SaddamÕs fear, and to prevent a Rogue Coalition in the
Middle East.
Chapter 4: Libya
In my prospect theory analysis of Libya8 I will apply the same
method used previously. I will determine whether the US is acting from a
window of opportunity or Basement of Fear in regards to Libya, by
examining its threat perception and fear of loss, a nd will then do the
same for Libya regarding the United States. Are US decision-makers in a
Basement of Fear regarding Libya?
Libya's sponsorship of terrorist actions such as the bombing of
Pan Am Flight 103 in 1988 over Lockerbie Scotland, and territorial waters
disputes in the Gulf of Sidra9 has led to a high threat perception of
Libya by United States decision-makers. In terms of potential losses,
Libya is too weak to threaten the US's regional allies, and thus could
only create potential losses in terror attacks against United States
intrinsic interests and a weakening of US strategic interests
(commitments) by confrontation. Therefore United States decision-makers
are not acting from a Basement of Fear in regards to Libya.
Muammar Qadhafi, like Saddam Hussein is a unitary leader, with a
firm grasp on the reins of power in Libya. Thus Qadhafi's personality has
a great impact on Libya's policies. Qadhafi has a high threat perception
of the US, due to its hostile response to his support of terrorism, his
attempts at acquiring weapons of mass destruction, and his claim to
international waters. In this instance however, high threat perception
does not translate to a Basement of Fear, as Qadhafi is not trying to
recoup or avoid a loss. Muammar Qadhafi is a calculating, Rational
leader, that can be deterred as indicated by the 1986 F-15 air strikes
against his home. Thus rehabilitative and retributive sanctions, like
those outlined in the Iran and Libya Sanctions Act of Augus t 5, 1996, are
appropriate and should be implemented.
Chapter 5: Syria
In my prospect theory analysis of Syria10 I will apply a slightly
different method, since the US and Syria are not engaged in a serious
political clash. I will determine whether the United States is acting
from a window of opportunity or Basement of Fear in regards to Syria, by
examining its threat perception and fear of loss, then determine Syria's
threat perception of the United States and whether Syria is acting from a
window of opportunity or Basement of Fear regarding the Peace Process.
Are US decision-makers in a Basement of Fear regarding Syria?
United States threat perception from Syria is ambiguous. While
the US decision-makers acknowledge the Rogueness of Assad’s regime, they
have an unmotivated bias to diminish their threat perception in order to
further the Peace Process in the Middle East . In terms of United States
past and potential losses, the invasion or destruction of the state of
Israel is a potential loss that would be felt. Fortunately, as things
stand, this is unlikely. I do not believe that the US decision-makers are
acting from a Basement of Fear in regards to Syria.
Like in many other Arab states, Hafez al-Assad is the unitary
ruler of Syria. Often described as cunning and ruthless he is said to be
a calculating and risk-adverse leader. This analysis is belied by Assad's
risky participation in the Peace Process.11 Assad's threat perception of
the United States is low. While the US is dissatisfied with Syria's
sponsorship of terrorist groups in Lebanon, its quest for weapons of mass
destruction and its involvement in narcotics, it is surprisingly lenient
on Syria . The US would only enter into conflict with Syria if there was
a dire threat to the security of Israel. In this instance, despite a low
threat perception, Assad is acting in a Basement of Fear. The loss of the
Golan Heights is what is pushing him to enter the Peace Process, despite
the significant domestic costs of dealing with Israel. This view is
opposed by the hypothesis that Assad joined the Peace Process as a Window
of Opportunity (to regain the Golan Heights), and was deterred by the
significant domestics costs of dealing with Israel, accounting for the
breakdown of the Peace Process. Unfortunately this view fails to take
into account the role of Israel's right wing government in the breakdown
of the peace process.
Chapter 6: Cuba
In my prospect theory analysis of Cuba12 I will apply the same
method used for Iran, Iraq and Libya. I will determine whether the United
States is acting from a window of opportunity or Basement of Fear in
regards to Cuba, by examining its threat percep tion and fear of loss, and
will then do the same for Cuba regarding the US. Are US decision-makers
in a Basement of Fear regarding Cuba?
With the resulting cancellation of foreign aid following the fall
of the Soviet Union, Cuba has been unable to support any terrorist threat
or of exporting the communist revolution to any other country in South
America. While Cuba did engage in terrorist and military activities in
foreign countries, this was mainly a front for Soviet initiative. As
things stand, Cuba is very much unable to threaten anyone, least of all
the United States. Yet the US has a high threat perception of Cuba. This
is due to an unmotivated bias of seeing Fidel Castro as evil. Memories of
the Cuban missile crisis artificially inflate the threat perceived from
Cuba. Since the Monroe Doctrine, the United States has viewed Cuba as in
its sphere of influence. When the Communists seized power in Cuba, the
United States incurred a loss. Due to the Endowment effect the US has
undertaken efforts to regain Cuba, that were not necessarily justified by
its worth. The US decision-makers are in a Basement of Fear in regards to
Cuba.
Fidel Castro is the unitary leader of Cuba. He views a very high
threat perception from the United States, and rightly so. Numerous
attempts on his life have been initiated by the United States, as well as
attempts to depose him, foremost among those, the infamous Bay of Pigs
invasion. Castro is in the curious position of being in a Basement of
Fear and a Window of Opportunity at the same time. Castro is in a
Basement of Fear due to the potential losses he might incur: the loss of
control of Cuba, and/or his life. On the other hand, US sanctions have
the effect of granting Castro a Window of Opportunity, justifying his
authoritarian control and aiding Cuba economically by providing incentives
for it to trade with Europe. In regards to sanctions, the Helms-Burton
Act should be repealed. It is the result of politicians pandering to
their constituencies as well as an unmotivated bias against Cuba. The
Helms-Burton Act provides a justification for Castro's continued
authoritarian rule. The extraterritorial provision of the Helms-Burton
act will have a destabilizing effect on Cuba, as the European investors
will leave for fear of United States sanctions. This might lead Castro to
bring down Cuba with him, resulting in a massive chaos and a sea of
refugees towards the US.13
Chapter 7: North Korea
In my prospect theory analysis of North Korea14 I will apply the
same method used previously. I will determine whether the United States
is acting from a window of opportunity or Basement of Fear in regards to
North Korea, by examining its threat perception and fear of loss, and
will then do the same for North Korea regarding the US. Are United States
decision-makers in a Basement of Fear regarding North Korea?
US threat perception of Korea is quite high. Despite massive
starvation, North Korea commands significant military forces, equipped
with modern Soviet weaponry. Its recent quest for nuclear weapons has
only served to highlight this threat perception. This high threat
perception does not translate into a Basement of Fear. The US has not
lost anything in the past, and while it does stand to lose its South
Korean ally, and its prestige, both scenarios are unlikely.
Kim-Jong-Il, as the successor of Kim-Il-Sung has a high threat
perception of the US. As the ally of North Korea's mortal enemy, the US
appears as an enemy. Furthermore, the historical context of the Korean
war, and the incidents that occurred thereafter at the DMZ, create an
unmotivated bias to see the US as a threat. This threat perception,
translates into a basement of fear for Kim-Jong-Il, for he stands to lose
his leadership and his life, as his country slowly disintegrates around
him. This Basement of Fear causes North Korea to be unresponsive to US
deterrent threats, and might lead to the implosion and explosion of North
Korea.15 In regards to sanctions, retributive sanctions should be dropped
altogether, in order not to precipitate a preemptive strike by North
Korea. To paraphrase professor Tanter, we need to "hug the thug, not mug
the thug."
In conclusion, Prospect Theory seems to be an adequate tool for
foreign policy analysis. Unfortunately, it is often separated from the
decision-making process, as decision-makers are subjected to political
pressure, and are not always granted the luxury of viewing the situation
from the opposition's point of view. Furthermore Prospect Theory, in
order to be used effectively, requires vast amounts of information about
the opposing decision-maker(s), something which is not always available.
Prospect The ory can be used in hindsight to explain otherwise
incomprehensible decisions, but could influence the future of the
decision-making process, were decision-makers more inclined to view the
situation from their opponents' eyes.
Endnotes
1. Raymond Tanter, Rogue Regimes, unpublished
2. Jack S. Levy, Robert Jervis, Barbara Farnham, Rose McDermott, Audrey
McInerney, and Eldar Shafir, Avoiding Losses/Taking Risks: Prospect Theory
and International Conflict, ed. Barbara Farnham (Ann Arbor: University of
Michigan Press, 1994)
3. Bruce Russet, Harvey Starr, World Politics, the Menu for Choice, 5th ed
(W.H. Freeman and Company, 1996), p111-112
4.Raymond Tanter, Rogue Regimes, unpublished, p5-6
5. Raymond Tanter, Rogue Regimes, unpublished, chapter 2
6. The populationof Iran is approx. 66,094,264 (July 1996 est.) The
population of Saudi Arabia is approx. 19,409,058 (July 1996 est.) Source:
http://www.odci.gov/cia/publications/nsolo/factbook
7. Raymond Tanter,Rogue Regimes, unpublished, chapter 3
8. Raymond Tanter, Rogue Regimes,unpublished, chapter 4
9. Raymond Tanter, Rogue Regimes, unpublished, p190
10. Raymond Tanter, Rogue Regimes, unpublished, chapter 5
11. Raymond Tanter, Rogue Regimes, unpublished, p246-247
12. Raymond Tanter, Rogue Regimes, unpublished, chapter 6
13. Raymond Tanter, Rogue Regimes, unpublished, p300
14. Raymond Tanter, Rogue Regimes, unpublished, chapter 7
15. Raymond Tanter, Rogue Regimes, unpublished, p358-365